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UNEMPLOYMENT IN AMERICA is at a 26-year high, durable-goods orders fell to a six-year low, and the Treasury Department is starting to "stress test" U.S. banks to see if they can survive more dire economic conditions.

And yet, amid all this doom and gloom, investors and traders alike are starting to move back into banks and other financials stocks.

In the options market, patterns indicate all the telltale signs of investors and traders speculating on a quick bump higher.

Pick a big financial stock, and even some of the second- and third-tier names, and you'll see out-of-the-money call buying in anticipation of an advance, put selling to profit from an advance, and all sorts of complicated trades to profit from volatility fluctuations.

Many traders believe that options on financial stocks that expire in March are too expensive to buy. They are choosing to sell these options that they perceive to be high priced, and buying options that expire further out in the future.

Keith Horowitz, Citigroup's stock analyst, said in a report issued today that those banks, according to how he understands the stress test, do not need to issue more equity, and if they do, he said it will be at a conversion price above current prices. "Also," he said, "these stocks are pricing in significant dilution, and we believe risk/reward is excellent at these levels."